Mortgages are a common thing when buying a house or other estate. People tend not to wait until they’ve gathered all their money, they just apply for loans and pay interests over the course of years. It’s pretty convenient, especially when an estate is a limited-time offer.
But choosing a good mortgage can be a huge headache, as a lot of money comes into play and you’d certainly not want to make a mistake. That’s where brokers come in.
Who is a mortgage broker?
A mortgage broker is a licensed professional who acts as a middleman between you, and the bank/lender. They are well established financial experts, who gather your personal information (and credit history, income verification) and apply for loans on your behalf.
Mortgage brokers collect all documentation needed, handle the paperwork, and generally speaking, make your life easier when it comes to mortgages.
Why do you need them?
Well, such brokers usually have a set and trusted pool of lenders. When you come to get a mortgage, there’s a whole lot of offers around, some good, some bad, and choosing a proper one might take a lot of time and cause stress due to unnecessary risk.
Mortgage brokers take your needs into account and find the best-suited offer for you. They make sure the interest rate is acceptable, and the offer is overall beneficial.
They are people who save you a lot of headache for a bit of extra money.
How do mortgage brokers make their money?
Through Affiliate connections and fees.
Whenever you agree for a mortgage broker to operate on your behalf, they are getting paid a small percent of the total amount of a loan.
Most of the time it’s the lender who pays the broker, but sometimes you can agree on a deal that a borrower pays the broker. Both have their advantages and disadvantages, but that’s a topic for another time.
Their interest is usually between 0.5% and 3%, however it all depends.
How much is that? Well, with $51,856/year being the average pay, their yearly wages vary between $29,362 and $197,489.
Depending on the country, this might vary. Countries usually have regulations as to the maximum percentage of broker’s fee.
When choosing a mortgage broker you want to ask them about their lender and borrower compensation fees. This will tell you how much of the amount they get, and who pays for it.
A decisive factor on how much brokers charge is competition in the area. Usually, if there’s more competition, it will be easier for you to get a better deal.
After all, every broker wants you to hire exactly them, right?
Should I use the broker’s help?
Well, if you want to save yourself a bit of a headache and a lot of time, definitely go for it.
If it’s the lender who pays the broker, what difference does it make to you?
Besides, brokers usually have special offers only they have access to, and you couldn’t get there without their action.
By hiring a broker you don’t need to bother going around and checking the offers at different banks. Mortgage brokers got you covered, they sit in a huge pile of offers all the time, and what’s more, they make sure to choose the best one for you.
How are brokers different from loan officers?
Brokers are Independent, whereas loan officers work for banks. They are paid an hourly rate to get a deal for you, while brokers get paid a fee.
Loan officer doesn’t care about you getting the best deal, they care about you staying with their bank. Mortgage Broker cares that you get the best deal out of all banks, because that’s what they get paid for.
Why would a lender pay the broker, if people can get a deal directly with the lender?
Interesting, right? Why would they pay a couple percent extra just to have brokers get the deals for them?
Well that’s exactly why.
Mortgage brokers are a people of trust. They are the ones folks go to when looking for a good mortgage deal. If you were the bank, say the broker gets you a lot of clients, would you bother paying him a small (compared to the loan) fee? Of course not. That’s why brokers exist.
How do you become a mortgage broker?
In order for you to become a mortgage broker you’ll need to take a few steps.
Firstly, a college degree is not technically required. I do say technically, because it’s not formally required, but you might struggle to get and work if you aren’t educated in fields of economics, finance (and analysis), accounting or law.
Thus being said, a high school diploma is enough, but a degree greatly improves your chances of actually working as a broker.
Secondly, Brokers need to be licensed to do their job. They need at least 20 hours of training at an approved institution. They get schooled on topics like government regulation, work ethic etc.
After that, you’ll need to pass an exam to prove you’ve learned what’s necessary.
(if you live inside the US, google SAFE Mortgage Loan Originator Test)
There’s also this thing called broker bond, which works like a surety bond. It allows your customer to sue you if you were to use mischievous practices or fraud. Bonds are regulated by a government and need to be paid by a broker, however this can be done annually, like insurance, not all at once.
After that, you’re good to go.
You’ll need to renew your license every year, which again takes 20 hour of training.
This allows you to stay up to date with legal regulations, and helps you maintain the standards.
Of course, as a fresh broker you’ll probably need to work out the deals with lenders in your area. It doesn’t happen magically.
Is becoming a broker worth it?
Well, if you’re the right type of person. If that’s your thing, mortgage brokers are paid significant amounts of money for their job. If you’ve not decided on your career path yet, make sure to give that a good amount of thinking.
Brokers are licensed professionals that help their clients get the best deal when it comes to mortgages and loans.
Becoming a broker takes in a great deal of knowledge, but pays off in 0.5% up to 3% commissions on the loans, resulting in the average pay of $50.000 a year.
From the client’s point of view, hiring a broker is quite useful as it allows them to save quite a bit of pain.
Since it’s usually the lender who pays the broker for getting them a deal, it’s safe to say that mortgage brokers make their clients’ lives easier.